Why Airbus is wrestling with its 'A380neo'

With re-engining central to four successful airframe-refresh programmes, one could be forgiven for wondering why Airbus is wrestling with its decision about whether to update its flagship product.

But the reality is that Airbus’ assessment on whether to implement an expensive and risky mid-life update for the A380 is probably more complex than its original launch decision 15 years ago. Back then, the key questions were around whether there really was a sizeable market for the aircraft, whether Airbus needed the A380 to fully challenge Boeing and whether the then-consortium of partners could cope industrially and financially with such a huge project. And this time around, the potential risks are similar.

The hard truth is that the A380’s popularity has so far failed to live up to expectations. Okay, we all know that Airbus’ much-touted demand forecast of 1,500 ultra-large aircraft over 20 years has never been a serious sales target for Europe’s very big jet. That tally, which includes a couple of hundred freighters, is Toulouse’s forecast of theoretical total market demand. And, as ever, its target is to capture a 50% share. So the real aspirational 20-year sales number for the A380 is more like 650 passenger units.

And if production could keep ticking over at the current modest rate of 30 units a year, that total would not be unrealistic. But with sales stagnant and the backlog declining, the A380 will run out of gas well short of that target.

It is ten years since the A380's maiden flight in April 2005

A lot has happened since the A3XX crystalised into the A380 in 2000, when the programme became firm. The 747 has been succeeded as the industry’s benchmark for the lowest seat-mile costs by the 777-300ER and there is now over a decade’s worth of evidence that the market for very big airliners is developing nowhere near as quickly as some had hypothesised.

Airbus has failed to replace those huge fleets of 747s that plied the long-haul airways in the 1990s and 2000s on a one-for-one basis as it once thought it could. Certainly, the A380 has infiltrated many of those big Jumbo operators, but the bulk of the replacement market has so far remained with Boeing – and its 777-300ER.

And the A380 is not getting any younger – on 27 April, it will be 10 years since its historic maiden flight. No wonder even the A380’s number-one fan – Emirates boss Tim Clark– is not keen on taking aircraft into the next decade powered by the original engines.

A key difference between the A380 and the four re-engined types enjoying strong sales is that they are all well established in the marketplace. Whereas production numbers of the A320, A330, 737 and E-Jet are in four digits, the A380 is only 150 aircraft into its production run.

And Airbus is also only just starting to sell A380s for more than it costs to build them, with a mountain still to climb to recover all the development costs. So the Airbus bean-counters will need a lot of convincing to commit billions of euros more to a programme that is yet to wash its face financially – and with the uncertainty that it ever will.

But perhaps the re-engining could be the opportunity to move forward with another Clark favourite – the A380 stretch. While Airbus might not want to commit to an even more expensive update, the argument for launching a bigger version could be stronger than it first appears. The current aircraft’s wing is already designed for a stretch, and the new engines – combined with, say, 100 more seats – could create an unbeatable value proposition for decades to come.

While the risks around an 'A380neo' may seem insurmountable, it would be foolish to write off the ultra-large airliner concept too quickly. Given world traffic growth and increasing airport congestion, it seems illogical that strong global demand for a 500 to 600-seat airliner will not materialise sooner rather than later.

The question is, will Airbus be brave enough to keep the A380 going until its time arrives?